Report: Customers Have Forked Over $500 Million to Cover Oncor's Phantom Tax Payments

Dallas-based utility Oncor has collected half a billion dollars from ratepayers to cover federal income taxes it has never paid. Last year alone, customers paid $230 million to reimburse the utility for a "phantom" tax bill, according to a new report from the Texas Coalition for Affordable Power.

The fact that Oncor doesn't pay federal income taxes isn't illegal, or even all that remarkable. Most regulated utilities don't. And one like Oncor that's a subsidiary of a holding company wouldn't pay Uncle Sam directly anyways. Its parent, Energy Future, would. The problem is, the report indicates EFH hasn't since at least 2008.

That might be because in its quarterly filings the power generation and utility company has logged huge net losses due to low electricity rates pretty much since it was taken private in the biggest leveraged buyout in history.

What's really obnoxious about the whole arrangement is that Oncor is a regulated utility with a market monopoly. The Public Utility Commission of Texas sets the rates it may charge customers, and allows Oncor to collect fees to cover certain costs, like a tax bill. We don't have any choice but to pony up. Meanwhile, some 80 percent of the fees it collected for income taxes over the last few years went to its parent company, which announced a structured bankruptcy plan on Monday. It isn't a stretch to conclude that those fees were used to prop Energy Future up while it prepared for Chapter 11.

Even if regulators choose to pursue that money now -- which they won't -- a bankruptcy filing may place it beyond their reach. The Public Utility Commission had the opportunity to correct the over-payments to Oncor in 2009, the report says, reducing the amount utility customers paid by $100 million a year. PUC decided against it.

So, does the legislature plan to do anything about it? TCAP, a coalition of smaller municipalities that banded together to purchase electricity as a group, says pending pending legislation may strip the PUC of its ability to correct over-payments.